Brooklyn Brokers’ Turf Wars Get Vicious As Competition Increases
Brooklyn’s meteoric rise has seen Manhattan heavyweights arrive to grab a piece of the coveted real estate pie.
In a script that may could have been overseen by Martin Scorcese, competition between Brooklyn brokerages is getting vicious. A fascinating story in The Bridge shows how the once sleepy real estate borough across the East River has emerged as a behemoth, as big name Manhattan brokerages sharpen their knives and attempt to do battle for a slice of the most unaffordable city in America.
Like a scene from The Goodfellas, heavyweight brokerages, like Corcoran, Halstead and Douglas Elliman are duking it out, with relative newbie Compass, trying to muscle in on the action, as well. Max Dobens, executive manager of sales in Brooklyn for Douglas Elliman, describes as “three times more intense than it is in Manhattan.” Adds Dobens: “Companies want to grow here, but there are a finite amount of good agents.”
And that limited number of good agents has brokerages treating them like first round draft picks for the NBA. Douglas Elliman offers brokers an in-office massage twice a week and regular training sessions; Halstead modernized its technology, marketing and training. Of course money, is what speaks the loudest and so signing bonuses and high commissions are commonplace. And other brokerages clearly feel it’s open season for poaching the competition’s talent.
“I get a poaching call about once a week,” Morgan Munsey, best known for selling BedStuy brownstones said. Some agents prefer to gain Brooklyn traction quickly, buying out smaller companies rather than poach their talent. That was the case when Citi Habitats, a Manhattan-based firm purchased Dave Maundrell’s Williamsburg based aptsandlofts.com, in 2015, thirteen years after he founded the company.
“There was a constant onslaught of people calling my brokers,” Maudrell recalls. “You need to have a strong brand to be successful in Brooklyn real estate today.”
There have been a number of notable landmarks that have fueled the Brooklyn real estate inferno. As the condo boom of the early 2000’s caught alight, Corcoran emerged on the scene with their co-brokering model which opened up the market for brokers to share listings and commissions. The emergence of Williamsburg and coveted brownstones in Clinton Hill, Fort Greene and Park Slope brought in Manhattan buyers and further increased prices. The latest breakthrough has been with technology. Four year old company, Compass’ whole business model is based upon their purported expertise in technical matters. One of its founders, Ori Allon, has a PhD in computer science and was director of engineering at Twitter’s NYC office. It’s aggressive hiring of sales agents from other companies, securing $225 from investors and a valuation of over $1billion has other brokerages crying a case of The Emperor’s New Clothes.
“If they’re worth $1 billion, I’m worth $10 billion,” Arthur Zeckendorf , co-chairman of Terra Holdings LLC, a private company that owns New York brokerages such as Halstead Property and Brown Harris Stevens, told the Wall St Journal. The largest U.S. brokerage, Realogy Holdings Corp., whose brands include Century 21 and Coldwell Banker, has a market value of $3.8 billion—not including $3.3 billion in debt, the Journal stated.
Compass, for their part say their superior technology cuts brokers’ time, allowing them to show more homes and deliver more sales, which, in turn, serves as a recruiting tool—enabling the rapid growth sought by investors.
“The way that we grow our revenue faster is we hire more agents—once they’re here, we help them grow their business faster,” Thirty-seven year-old Compass co-founder/Chief Exec and former Goldman Sachs banker Robert Reffkin, told the Journal.
As is the trend by pitching themselves as a software company, rather than a traditional brokerage, Compass has caught the technology zeitgeist sweeping the industry. Whether its clever marketing or counts for a substantial change in the business of buying and selling property remains to be seen. It has clearly ruffled feathers.
“Anyone who knows what they’re doing doesn’t need these technology platforms,” said Will Randow , an analyst at Citigroup Inc. who follows the sector. And several former Compass staffers and agents said the company’s technology, while well-designed, isn’t revolutionary.
Patrick Brennan is Compass’ senior managing director of sales in Brooklyn. He left Corcoran for Compass alongside several other agents. The ensuing furore prompted Corcoran to sue the new brokerage for “brazenly and intentionally” raiding key Corcoran offices. Although the suit was settled, the one thing uniting many longer standing brokerages doing business in Brooklyn is their distaste for Compass.
“A big part of the competition is who can maintain the best roster,” Brennan said. “Brooklyn has long-term growth ahead of it. People want to be there. The money’s arrived.”
It arrived a long time ago.